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Like traditional loans, online loans have advantages and disadvantages. Some people like the convenience, while others avoid them because of the potential risks. Below, we lay out some of the positive and negative aspects of online loans.
Pros of Online Loans
- Convenience: From learning about requirements to applying for a loan to getting approval, you can do everything online from your own home – or anywhere else. Once approved, the money is directly transferred to your bank account.
- Instant Decision: Compared to their more traditional competitors, online lenders offer a faster processing time. Some lenders can even send you a quote within a few minutes. Further, they usually transfer the money within one working day.
- Easier Qualification: For people with a low credit score, low annual income, or no credit, it is often much easier to qualify for an online loan than for a traditional bank loan.
- Low rates and fees: As they have lower maintenance costs than a traditional bank, many online lenders can offer a lower interest rate and waive application fees.
Cons of Online Loans
- Security Risks: Sharing so much sensitive data about yourself and your finances online comes with some potential security risks of data breach.
- Hidden Fees: If you don’t take a detailed look at the terms and conditions, you may end up paying some hidden fees.
- Technical Challenges: As all the processes of an online loan require using newer technology, it can be challenging for people with less technical knowledge.